Paytm usage has increased over the last few months as India pushes towards digital economy. Some users took advantage of a loophole in the online payment platform to get free credits and other benefits, which was discovered by Paytm and a stern measure was taken to prevent it. But that did not bode well for the digital wallet company.
Paytm announced on Thursday that it is withdrawing two percent charge on credit cards for adding money to wallet owing to the immense inconvenience caused by the move. The withdrawal took place in just 24 hours after Paytm implemented transaction fees on credit cards in a bid to curb misuse of credit cards.
The company said that some users took advantage of the free transactions to recharge their wallet using a credit card and then transfer the money back to their bank accounts. This not only added funds to the account at zero cost, it also won free loyalty points and free credits.
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International Business Times, India, interviewed an avid Paytm user, who spoke on the condition on anonymity, about utilising Paytm's model to rotate money.
"I recharged my Paytm wallet using my credit card, transferred the money back to my savings account and used the funds to pay by credit card bill. Although it was a one-off case, I was able to avoid hefty bank charges for non-payment and affect my credit score."
This trend affected Paytm, as it loses money. Paytm's revenue model relies on users spending the money in their wallet within the network. The online payment solutions company said that it pays hefty charges to banks and card networks when users use their credit cards.
For the sake of millions of customers!
Paytm backtracked on its two percent charge on using credit card for adding money to wallet after it was met with strong resistance from a large group of users. But the One97 Communications Ltd-owned company is committed to build new features to curb any kind of misuse on its platform.
"With an intent to prevent the misuse of transfer to bank facility at 0%, we had applied a refundable fee of 2% on add-money through credit cards. At the same time, we are conscious that this move caused inconvenience to a large segment of our users, including those who are using their credit card for genuine transactions," Paytm said in an official blog post.
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Paytm currently has 200 million users, making it India's largest online payment platform. The move was partly to keep its users from switching to rival MobiKwik, which promised to offer services at no cost. MobiKwik has a user base of 55 million in India.